Volkswagen Lowers Profit Forecast Due to China Market and Write-Downs

Volkswagen AG lowered its profit forecast following a sharp contraction in China and a €6 billion write-down related to Porsche AG. While the operating profit margin is projected not to exceed 1%, company shares lost 7.5% in value.

Contraction in China and Write-Downs

Volkswagen AG carried out a write-down of €6 billion, which is approximately $6.9 billion, regarding the sharp contraction in China and the sports car manufacturer Porsche AG. This situation was the main factor in the company lowering its profit forecasts.

Major Drop in Profit Margin Expectations

The company had previously expected an operating profit margin of at least 4%. However, the acceleration of the transition to electric vehicles in Europe negatively affected profitability, and it was announced that the operating profit margin will no longer exceed 1%.

Historic Drop in Shares and Industry Impact

Company shares experienced their largest decline in a year, losing 7.5% in value. This situation triggered a broader sell-off among automotive manufacturers, including BMW AG, Ford Motor Co., and Stellantis NV.

Total Expenses and Restructuring

The manufacturer announced that the total expenses affecting this year's results are approximately €10 billion. These expenses also include restructuring costs related to workforce reductions and impairments on assets in China.

Statements from Management

Chief Financial Officer Arno Antlitz stated that excluding special items, the operating profit margin would be approximately 4%. However, Antlitz emphasized that they have no time to lose and that this situation is not sufficient for future investment.